Former Citadel engineer pleads guilty to stealing closely held information

Tribune illustration

Tribune illustration

Jason MeisnerTribune reporter

Plea agreement in theft of Citadel hedge fund information

A former engineer with Chicago-based Citadel LLC pleaded guilty today to stealing closely held information on the giant hedge fund’s automated trading system and dumping some of the evidence near Wilmette Harbor when he thought the feds were on to him.

Yihao "Ben" Pu, 26, also admitted in a plea agreement with prosecutors that he had stolen similar information from a New Jersey-based firm – identified only as Company A – days before he resigned from that company and joined Citadel.

Pu, a 2009 Cornell grad, faces up to 20 years in prison when he is sentenced in November by U.S. District Judge Charles Norgle. A co-defendant is scheduled to go to trial next month in federal court in Chicago.

A former quantitative engineer at Citadel, Pu worked in the hedge fund's high-frequency trading unit that makes large volumes of trades in securities in fractions of a second. Citadel developed algorithms to predict the movement of securities and commodities. The algorithms are incorporated in computer programs that automatically execute the superfast trades, prosecutors said.

According to his plea agreement, Pu had access to certain trading signals, called "alpha data" and "term data," generated by the computer programs. Citadel's confidentiality policies bound Pu to keep any proprietary information in strict confidence and prohibited him from copying such information, according to the indictment.

Starting in May 2011, Pu allegedly downloaded thousands of files containing alpha and term data to personal electronic storage devices “for his own benefit,” according to the plea deal. After company officials confronted him that August, Pu enlisted the help of an undisclosed friend to take possession of hard drives and other data storage and began erasing some of the information.

Later, believing he was under federal investigation, Pu and his friend dumped some of the hard drives into a sanitary canal near Wilmette Harbor, according to prosecutors.

At the time of Pu’s arrest, authorities said they had recovered from the hard drives Pu's plans to start a hedge fund in China. That allegation was not mentioned, however, in his 30-page plea agreement.

Pu also admitted to stealing thousands of files containing Company A’s trade secrets on the day before he resigned from the company in March 2010. He joined Citadel less than two months later, according to the plea agreement.